We might think of cashless transactions as a modern phenomenon, with things like credit cards, debit cards, and contactless payments replacing the traditional bills in our pockets. However, the history of cashless transactions stretches back much further than this, with the Mesopotamians creating a cashless barter system a mindblowing 8000 years ago.
Today, cash is increasingly losing ground to plastic, electronic payment methods, and cryptocurrencies. In fact, certain countries like Sweden and India are already making moves to creating a totally cashless economy. Some reports estimate that the former will be a cashless society in just 10 years!
With all this in mind, we decided to take a look at the long history of cashless transactions, from the very earliest trade systems through to today’s electronic systems. Take a look at the infographic below, or if you’d prefer to read it in text form, click here for the full transcript.
What’s the new trend in monetary transactions? It’s all about going cashless! Credit cards, debit cards, and Amex cards have replaced the dollar bills in our wallets. What’s more? Super convenient payment apps like Google Pay and Paypal let you leave your wallet at home.
But did you know that cashless transactions started about 8000 years ago? Check out how cashless transactions evolved over time!
Prehistoric Age: Barter System
- The barter system was introduced some 8000 years ago by the Mesopotamians.
- People swapped valuables against an item they wanted from another person.
- Shells, grains, beans, livestock and even lands were exchanged against any required object.
- Salt was another item of great worth. At one time, salt became so valuable that Roman soldiers were paid their salaries with salt!
- The word ‘Salary’ originates from the Latin word ‘sal’ – salt.
- Since the value of an item couldn’t be fixed, often objects of lesser worth were exchanged against more valuable items. Thus, fraudulence crept in.
Bronze Age: Valuable Metals
- About 3500 years ago, valuable metals such as bronze, silver and gold were used as a form of money.
- Bars and rings of these precious and semi-precious metals were produced from which pieces were cut and weighed.
- Later, bronze, copper, gold and silver coins were introduced for convenience.
- Forgery appeared and gold was mixed with silver or other metals to increase the weight of the bars and coins.
- Chinese merchants invented the first form of paper money about 1000 years ago.
- Marco Polo introduced paper money to Europe in the 13th century after he came back from China.
Medieval Age – 18th century: The Rise of Cheques
- The 14th century saw the rise of “cheques”. They were convenient bills of exchange that allowed people to carry funds abroad without actually carrying the gold.
- The first forms of cheques were handwritten and became quite popular by the 17th
- These cheques could be given to a bank in exchange for money. It could also be given to a merchant with a monetary value written on it that could be later deposited in the bank.
Did You Know?
The earliest specimen of handwritten cheques still in existence was drawn on the bank Messrs Morris and Clayton based in London. It is dated 16th February 1659 and was for £400.
- The concept of “daily clearing” started during the 1770s. Clerks from different banks would meet up at the Five Bells Tavern in the Lombard Street in London to exchange their cheques and settle all transactions.
- Printed cheque books were introduced during the late 18th These cheque books were easier to carry while travelling.
19th century: Money Transfers
- Bank transfers or wire transfers started during the mid 19th
- Western Union launched the first widely used wire transfers service in 1872.
- It used the telegraph network for the transfer. Once the sender paid money to one telegraph office, the operator would send the message to another office and the fund would be released the recipient.
- Using passwords and codebooks, this method of transaction and sending money was pretty convenient. People from any region could send funds across the globe.
- By 1877, almost $2.5 million was transferred each year through this service.
20th century: Convenience of Cards
- During the early 20th century, banks started issuing plastic cards along with cheques known as “cheque guarantee cards”. The bank details would be embossed on the card and printed on the payment slip of the cheque through an “imprinter”.
- The first ever transaction card was a metal card provided by the US Western Union in 1914 allowing free deferred payment privileges.
- The first bank card, CHARGE – IT, was introduced by the Brooklyn banker, John Biggins in 1946.
- A customer could use this card for a purchase as the bill would be forwarded to Biggins’ bank. Later the bank would settle the merchant’s amount and obtain the payment from the customer.
- The first ATM card was issued by Barclays in London in 1967.
- By the 70s, cards with magnetic strips came in. Lloyds Bank introduced the first bank card to have an information-encoded magnetic strip using a pin for security.
- The mid 80s saw the introduction of electronic Point of Sale (POS) terminals where customers can swipe their cards through a “swiper” for transactions.
The 21st Century: Digital Transactions
In the late 20th and early 21st century, innovative technologies have led to the emergence of a whole new wave of cashless payment technologies. Payments have become ever more convenient.
- In 1994, Stanford Federal Credit Union was the first bank to offer online transactions for all customers.
- In 2000, Paypal was launched following the merger of Confinity and X.Com, allowing online payments between individuals.
- Paypal now has 254 million customer accounts and in 2017, Paypal processed 6 billion payments.
- In 2007, Western Union tied up with GSMA to develop mobile money transfer, allowing money to be sent directly to mobile devices.
- In 2018, 70% of people in the UK now bank online.
- Bitcoin version 0.1 was released in 2009 and was the first established cryptocurrency, offering an alternative to traditional banks.
- Bitcoin calls itself a ‘secure decentralized working digital currency’, offering freedom from financial institutions and governments, and user anonymity.
- In December 2017, the price of one bitcoin hit an all time high of $19,783.
- Beyond Bitcoin, there are now 1,658 cryptocurrencies in circulation.
Contactless & Mobile Payments
- In 2007, the first contactless cards were issued in the UK by Barclays.
- By 2014, there were around 58 million contactless cards in the UK.
- Several online payment services emerged in the last decade. Google Wallet emerged in 2013, whilst Apple Pay launched in 2014. Both systems allow contactless payments from phones.
- Smartwatches and other wearable devices can be equipped with Apple Pay or Google Pay for the ultimate in payment convenience.
With just a click on your mobile phone or your PC, you can transfer money anywhere you want. Total Processing provides bespoke payment solutions for your business so that you don’t have to worry about your business transactions anymore.